IBIT: Money Supply Is Exploding

Summary iShares Bitcoin ETF is a strong buy due to favorable political and monetary conditions, with shares up 25% in the last six months. The U.S. administration’s pro-crypto stance and expanding M2 money supply are driving demand for Bitcoin, enhancing IBIT’s value. Bitcoin’s fixed supply and rising liquidity create a perfect storm for price appreciation, with a conservative price target of $148,000. Despite inherent volatility, the probability of a major liquidity reversal is low, making IBIT a clear way to capture Bitcoin’s next major leg up. Co-Authored by Noah Cox and Brock Heilig Investment Thesis iShares Bitcoin ETF (IBIT), a fund solely dedicated to custodying Bitcoin, has been a strong mover in 2025 despite an overall sluggish stock market. Shares are up more than 25% in the last six months and ~25% over the last month. I’ve written extensively about IBIT in the past, and I continue to be bullish on the Bitcoin ETF, given what, I think, is the perfect storm of both political and monetary tailwinds that directly support Bitcoin’s price. I believe conditions have basically never been better. Yet, Bitcoin (and by extension IBIT) remain below their all-time highs. I believe it’s becoming clear that this U.S. administration is much more pro-crypto than the previous administration (as promised on the campaign trail). Political promises don’t always hold water. This one appears to be doing so. Regardless of your politics, the political winds appear to be in Bitcoin’s favor here. Anyone (regardless of their political creed) can benefit from this. With the U.S. M2 money supply climbing to $21.76 trillion in March (up 4.1% year-over-year), I see expanding fiat liquidity driving the demand for scarce assets — and Bitcoin’s 21 million supply ceiling means that every incremental dollar printed deepens its digital scarcity. With more Bitcoin treasury companies hitting the market, more inflows into Bitcoin ETFs, and 2 states now live with their strategic Bitcoin reserve law, I think this could not be a better set up. IBIT’s structure offers a regulated, liquid vehicle that participates in basically 100% of Bitcoin’s upside. Forecasts point for another 50-100% move upward in Bitcoin’s price from here. With this, I believe shares remain a strong buy. Why I’m Doing Follow-Up Coverage It’s been roughly six months since I last published coverage on IBIT. Since the election, I believe just about all of the key catalysts have only accelerated. A combination of a growing M2 supply and increasing regulatory support in the US have made now a good time to circle back around on IBIT. Most of the tailwinds we could have dreamed of in 2024 are coming true. It’s rare that we see an investment thesis pan out this well. Since November, we’ve seen a slew of encouraging announcements. In March, Trump signed an executive order creating a U.S. “ Strategic Bitcoin Reserve ” from seized coins. I viewed this as an unprecedented nod to Bitcoin as a reserve asset. This was revolutionary, in my opinion, because no other person with influence comparable to Trump had ever publicly pushed for Bitcoin or cryptocurrency. I’ll dive more into what this means later, but the Trump admin supporting government accumulation of Bitcoin goes a long way to giving sovereign governments and state legislatures the confidence they need to build their own Strategic Bitcoin Reserves (SBRs). We are now starting to see that. Since November, IBIT has jumped about 23% (from ~$43.60 to ~$53.63). While on the surface this may not seem like a huge increase, in this same time frame, the S&P 500 has fallen about 2.70%. With this, I think the proof is in the pudding: retail dollars are coming into Bitcoin via IBIT. IBIT now holds ~ $59 billion AUM and trades roughly $2.2 billion in volume daily. When we look at IBIT’s liquidity chart, we see that the ETF has an overall liquidity grade of an A+, according to Seeking Alpha Quant. With this, I’m doing follow-up coverage to show what, I think, is next for the cryptocurrency and for the ETF. Money Supply Is Growing What’s nice about where we are now with Bitcoin is that there are a handful of really strong tailwinds that excite me about IBIT. I think the one that makes me most bullish is the fact that money supply is growing. After contracting in much of the second half of 2022 and 2023, U.S. M2 has grown for 15 straight months, reaching a record $21.76 trillion (+4% YoY) in March. The US is the world’s reserve currency, so growth in our M2 supply has a huge effect on the price of Bitcoin. Bitcoin is seen as a leveraged play on the growing money supply. M2 has generally been increasing for the last 100 years since the adoption of the U.S. Federal Reserve. Historically, there has been close correlation between M2 and Bitcoin. When US M2 supply surged about 25% in 2020-21, Bitcoin jumped from less than $10k to more than $69k . On the other side, when M2 contracted in 2022-23, this was closely correlated with Bitcoin’s last bear market. Liquidity is the foundation of Bitcoin’s bull runs. However, right now, we’re seeing what, I think, is a fantastic contrast between M2 and Bitcoin. It’s an issue of fixed supply versus exploding liquidity. Today’s ~4-5% M2 growth rate is well above Bitcoin’s sub-1% annual supply increase (post-halving). Quantitative models show a 0.6-0.9 correlation between global M2 and Bitcoin price. As money spigots reopen (multiple central banks are cutting rates), we should see the global money supply continue to grow. Valuation In my most recent piece of research on IBIT, I gave what, I believe, is a conservative price target of $148,000 for Bitcoin. My price target of $148,000 that I projected during my last piece of coverage was based largely on the April 2024 halving (-50% in new daily supply) plus anticipated ETF/institutional inflows — an effective 4x boost to net demand that justified at the time roughly doubling Bitcoin’s price. We’re now past the halving, and pro-crypto policies from Trump means that I think we’re about to see the strongest part of the bull run. I am still bullish on my price target of $148,000 — now roughly a 50% increase from where Bitcoin is today. I think this will prove to be a conservative price target in hindsight. If we look at where Bitcoin is relative to the top of the last cycle (roughly $69,000), we’re only ~45% above the last peak. In essence, we have near record global liquidity via a now rising M2 money supply, a favorable environment for Bitcoin, and now two states have passed legislation building out their own strategic Bitcoin reserves. This is all bullish. Risks To be clear, I’m really bullish on IBIT. I think this is almost the perfect storm for cryptocurrency investors. But this is not risk-free. Bitcoin (as is its nature) is highly volatile. While I think M2 supply growth is a huge catalyst, its actual short-term price action is next to impossible to predict. What this means is that for investors, volatility needs to be a feature you get used to or come to appreciate as a buying opportunity. Most great investments are especially volatile. I believe IBIT is one of them. With this, the other key risk (beyond volatility) is a liquidity stall. If M2 growth suddenly flattens or reverses (if we see the Fed start to tighten or fiscal austerity), the primary driver for Bitcoin could evaporate, as we saw happen in 2022. Some believe (such as Goldman Sachs) that inflation could jump up to near 4% by the end of this year. The market is betting on the Fed cutting interest rates 2 more times this year. There is no guarantee this will happen. We could see a liquidity crunch if the Fed were to tighten, since most of the market is not betting on this. Overall, however, I don’t see a full reversal in the growth of M2 as the likely outcome. Sure, growth could flatten, but I think a reversal is highly unlikely because overall fiscal policy by the U.S. government remains accommodative (they are spending a lot). Fifteen months of rising YoY M2, record deficits, and no political appetite for austerity means we need easier monetary support from the Fed for our system to work. Bitcoin is a huge beneficiary of this. Recently, MicroStrategy’s (now called Strategy) CEO, Michael Saylor, gave a talk about how public companies can use Bitcoin as a treasury asset to help boost their company returns. I think this presentation was a game changer because it lays out so clearly how adding Bitcoin to a company’s balance sheet can help enhance returns. This is one of the biggest hedges Bitcoin has to any M2 supply growth stalling. Bitcoin is finding new places to be a part of the financial markets. It’s well beyond IBIT as the sole way for stock market investors to get exposure to the cryptocurrency. IBIT is a great way to play Bitcoin, but other companies buying helps push the price higher. Bottom Line Those who have been reading my research know I have been super bullish over the last year and a half. As regulatory policies continue to tilt in Bitcoin’s favor, and M2’s supply increases, I continue to believe shares of IBIT are a strong buy. As we see the two main forces driving Bitcoin work hand in hand, I think the market is going to see how powerful the 21 million ceiling is to keep Bitcoin moving higher. As I mentioned before, what we have now is an unprecedented perfect storm. A perfect storm should push Bitcoin much higher than the 45% premium it has over its last cycle’s high. I think $148,000 is within reach. Bitcoin, of course, is not risk-free, but I believe the probability of a major liquidity reversal seems low at this stage of the cycle. In essence, if we look at the risks vs. the rewards (60-100%+) I think Bitcoin has more upside to work with from here. I believe that owning IBIT today will offer one of the clearest ways to capture Bitcoin’s next major leg up, which could be coming as soon as in the next few months. With this, shares continue to be a strong buy.

Source: Seeking Alpha